Today marks the 15-year anniversary of one of the most infamous days in Wall Street history. On December 2, 2001, Enron officially declared bankruptcy. Only one year earlier, the company reported $111 billion in revenue.
Enron began with the merger of two natural gas companies in 1985. By the peak of the Dot Com Bubble, the company had established the Enron Online (EOL) electronic commodities trading website. By 2000, EOL was executing $350 billion in trades. Enron also decided to dump a bunch of money into building a high-speed broadband telecom network just as the Dot Com Bubble reached its peak.
Despite the fact that the company never realized any significant returns on its telecom network, the company used an accounting technique referred to as mark-to-market to record projected returns as current profits. This technique allowed Enron to prop up what was later exposed as an accounting house of cards.
At its peak, Enron was the seventh-largest company in the U.S. and employed 21,000 people. However, the company’s accounting began to unravel in 2001, and the giant succumbed to Chapter 11 bankruptcy on December 2.
CEO Kenneth Lay was subsequently found guilty of 10 counts of fraud and conspiracy. Enron has since become the poster child of fraudulent accounting on Wall Street.
To this day, investors remember…
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